European stock markets in jittery recovery

LONDON: European stock markets mounted a modest recovery Wednesday but Asian indices failed to profit from a late overnight rebound on Wall Street, as traders warned of further volatility while tracking the outlook for US interest rates.

Around 1000 GMT, London’s benchmark FTSE 100 index was up 0.6 percent. It had slumped 2.6 percent on Tuesday.

“Volatility is back, and investors had better get used to it,” said Lee Wild, head of equity strategy at Interactive Investor.

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Following recent strong gains, a global stocks sell-off began Friday when bright US unemployment data sparked concern of high inflation and in turn faster-than-expected increases to US interest rates.

Wild noted that “just as markets cannot keep rising forever, they must also stop falling at some point, but it’s still unclear whether we’ve reached a level where buyers see value again”.

– Asian rally fades –

In Asia, traders began the day on a bright note as they took their lead from a recovery on Wall Street overnight.

The gains, which saw Tokyo and Hong Kong jump sharply, came as analysts said they had expected a pullback following months of rises that sent world markets to record or multi-year highs.

However, as the day wore on selling began to kick in. By the end of its session, Tokyo had added just 0.2 percent — having opened almost three percent up — while Shanghai lost 1.8 percent and Seoul plunged 2.3 percent by the close.

“Whilst there has been a lot of action in the equity markets over the past few sessions, trading in forex has been much more muted,” said City Index market analyst Fiona Cincotta, pointing to a steadier dollar.

“Whilst there is little high impacting US data this afternoon, investors will be listening out for influential Fed official John Williams as he speaks later today. Investors will be particularly keen to listen to his views on high bond yields and the recent market volatility.”

Analysts have been eyeing an increase in US bond yields that has been triggered in large part by a recent weakening of the dollar.

“The greenback continues to be the main driver on the currency markets as the perception the Fed are going to be more hawkish than anticipated this year,” said David Madden, market analyst at CMC Markets UK.

“There (are) growing concerns (that) the US central bank will hike interest rates four times this year.”

Bitcoin meanwhile surged once more, to $7,983.62, a day after it slid to stand below $6,000 for the first time since mid-November.

Despite Wednesday’s strong recovery, it remains well down on its record high of almost $20,000 reached just six weeks ago.